"Exchange Bank's top executive, J. Barrie Graham, resigned unexpectedly as president and chief executive officer of Sonoma County's oldest and largest commercial bank."

"Graham, a former U.S. Marine with a no-nonsense demeanor, was just the sixth president of the 118-year-old bank. He joined Exchange Bank in 1995, leaving Wells Fargo & Co. to become the bank's chief operating officer. In 2003, Graham replaced Reinking as CEO and led the bank as it shifted strategy to pursue growth more aggressively."

"Colleagues inside and outside the bank were stunned by the news as it spread rapidly Tuesday across the county's business community."

"The bank opened its first office outside Sonoma County, a lending branch in Sacramento, as Sonoma County builders moved into the Central Valley and scrambled to develop subdivisions. Exchange Bank has long been a key lender for local builders. But the real estate slump hit builders hard, and Exchange Bank has felt the blows."

"I always like to say we're intelligent risk takers. That may prove to be wrong now," Reinking said.

"The Santa Rosa bank has suffered losses in two of the past three quarters -- its first in at least 50 years, according to bank officials -- and its stock has lost half its value over the past two years."

"The bank reported $3.1 million in losses for the second quarter, largely because of construction loans that went sour."

"Exchange Bank wrote off $14.5 million in bad loans during the first half of this year, compared with $500,000 a year ago, said Bruce DeCrona, the bank's chief financial officer."

"Overall, 5 percent of the bank's $1.2 billion loan portfolio is 90 days or more overdue or not accruing interest -- about 10 times what the bank aims for, DeCrona said."

""We did not go out of our market to make exotic loans to unknown people. We stayed with our bread-and-butter underwriting and made loans to customers we knew," DeCrona said."

"Exchange Bank could end the year with a loss as officials tap income to write off bad loans and sell foreclosed properties."

"It tells you a higher percentage of their loans are involved in construction. The bank made a lot of money on these loans. It was probably the most dynamic area of growth in their loan portfolio," Ptucha said. "With hindsight you could say they did go too far. But these were developers with multimillion-dollar net worth that Exchange Bank had longtime relationships with."

"Bank officials defended their lending standards and the decision to expand into the Sacramento area."

"The speed at which this thing fell apart was just unheard of," Reinking said. "You work with builders both in good times and challenging times."

"A search of a home in the 300 block of East Robles Avenue turned up more than 80 plants, ready for harvest, Sgt. Mike Lazzarini said. He estimated the plants were worth about $16,000 if sold."

"No one was living at the home, which had been converted to accommodate the plants. Detectives are attempting to find out who was renting the home. But the initial search showed most of the rent was subsidized with payments from the Sonoma County Housing Authority, Lazzarini said."

3 Comments:

Cr at Calculates Risk has had a number of posts regarding CRE,and the exposure of Regional Banks.The Regionals were pretty much squeezed out of residential lending by the Securitization Model of financing home loans,and moved into CRE.Exchange Bank made a mistake moving into the sacramento market,but they were and are much better run than most Regional Banks.MUCH BETTER.If the first word is OH,can you complete the phrase...

"I always like to say we're intelligent risk takers. That may prove to be wrong now,"

Hmm...do people ever deconstruct their thought processes? Risk-taking looks easy when the market is moving upward. Here in the Bay Area, we like to think successful "risk-taking" comes naturally. It's rather ironic how recent cautionary history like the dot-bomb is promptly forgotten.

Now I hear of seminars for "flipping" foreclosed homes. Wow, talk about short memory! LOL.